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Research Questions

  1. Is there an alternative disability compensation approach that would support a more streamlined disability evaluation process that would reduce reliance on disability ratings?
  2. How would such a process affect benefits to the service member, personnel readiness, policy and legislation, and the direction and amount of cost change to DoD?

The joint U.S. Department of Defense (DoD) — Department of Veterans Affairs (VA) Integrated Disability Evaluation System is the process by which DoD determines fitness for duty and separation or retirement of service members because of disability. Service members who are evaluated for disability undergo a comprehensive medical examination to document all medical conditions and receive a disability rating for every condition documented during the exam. DoD and the VA use these ratings to determine the amount of disability compensation service members receive if they are determined to be unfit to continue serving and consequently medically discharged.

Proposals for reforming the DoD compensation system have been considered in the past, but a rigorous evaluation of what those alternatives might look like and how they would affect service member benefits and costs to DoD has not been conducted. In this report, the authors describe their evaluation of four hypothetical alternative disability compensation approaches that would support a simpler disability evaluation process: compensating based on the current objectives of the DoD system (and using current benefit formulas), compensating on the basis of a military career, compensating on the basis of unfitting conditions, or compensating similar to U.S. allies.

Each alternative reduces reliance on disability ratings for determining DoD disability compensation and focuses primarily on a single decision about whether a service member is fit to perform his or her duties. The authors evaluate the potential effects of each alternative on service member compensation, processing times, end strength, lost skills and experience, and readiness.

Key Findings

  • With one exception, none of the alternatives would guarantee that all service members would see benefits at least as large as the benefits they would qualify for under the status quo.
  • Each alternative would reduce the length of the IDES process relative to a sequential process by an average of 29 days, or approximately 13 percent of the average duration in 2018. This estimate could be a lower bound if adopting a fitness-for-duty evaluation system leads to efficiencies in other steps in the process.
  • The estimated time savings associated with implementing an alternative system imply that active-duty end strength for the Army enlisted force would fall by at most 0.2 percent relative to the current system.
  • A model of one of the most common occupations evaluated for disability — Army enlisted infantry soldiers (11B) — suggests that bonuses are generally more cost effective than an across-the-board pay raise at restoring end strength.
  • Many policies and legislation underpinning the current disability evaluation system directly rely on, or reference, disability ratings. As a result, many aspects of Title 10, Chapter 61, would likely require repeal or amendment under a shift to an alternative system; and associated authorities would require rescissions, changes, or reissuances.
  • None of the alternatives would improve outcomes for everyone. However, any alternative system should be evaluated not only on the basis of its direct costs and benefits but also on whether it is consistent with the broader objective of disability compensation.

Table of Contents

  • Chapter One


  • Chapter Two

    Overview of the Current Department of Defense Disability Compensation System

  • Chapter Three

    Alternative Department of Defense Disability Compensation Systems

  • Chapter Four

    Changes in Department of Defense Disability Compensation Under Alternatives

  • Chapter Five

    Implications of a Fitness-for-Duty Evaluation System on Processing Time, End Strength, and Human Capital Loss

  • Chapter Six

    Policy and Legislative Considerations

  • Chapter Seven

    Additional Design Considerations

  • Appendix A

    Prior Reform Proposals and Other Disability Compensation Systems

  • Appendix B

    Analysis File Development on Medical Discharges

  • Appendix C

    File Development for Analysis of Alternative 3

  • Appendix D

    Policy and Legal Requirements

  • Appendix E

    Additional Results for Alternative 1b, With and Without Combat-Related Special Compensation

  • Appendix F

    Additional Results for Alternative 1 and 2, With and Without Combat- Related Special Compensation

This research was sponsored by the Office of the Deputy Assistant Secretary of Defense for Health Services Policy and Oversight and Deputy Assistant Secretary of Defense for Military Personnel Policy and conducted within the Forces and Resources Policy Center of the RAND National Security Research Division.

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